Core Viewpoint - TSMC has taken legal action against employees involved in the potential leak of proprietary information related to its advanced 2nm process technology, which is expected to begin mass production in the second half of this year [2][3][4]. Group 1: Legal and Internal Investigations - TSMC has dismissed several employees suspected of attempting to acquire key proprietary information regarding the 2nm process during their employment [2][3]. - The company detected unusual access to employee files and initiated an internal investigation, leading to the discovery of potential leaks of its core technology [3][4]. - TSMC maintains a zero-tolerance policy towards violations of its trade secret protections and has implemented strict internal monitoring mechanisms [4]. Group 2: 2nm Process Technology - TSMC's 2nm process technology, which utilizes Gate-All-Around (GAA) transistors, is anticipated to significantly enhance performance and reduce power consumption, with a projected performance improvement of 10% to 15% and a power reduction of 25% to 30% compared to the previous N3E process [5][6]. - The average yield of the 256Mb SRAM module for the 2nm process has exceeded 90%, indicating that the technology is reaching maturity as mass production approaches [5][6]. Group 3: Market Applications and Future Developments - The 2nm technology is expected to support a range of upcoming products, including AMD's next-generation EPYC "Venice" CPU and various chips for Apple’s devices [5][7]. - TSMC plans to introduce enhanced versions of the 2nm process, such as N2P, which promises a 5% to 10% performance increase and a 5% to 10% reduction in power consumption compared to the standard 2nm process [7][8]. - The company is also developing N2X, an ultimate version of the 2nm process, aimed at high-end client CPUs and data center products, expected to be mass-produced by 2027 [8].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of $227.98 [5][8][9] Core Insights - The company reported Q1 2025 revenue of $25.53 billion, a quarter-over-quarter decrease of 5.1%, with a gross margin of 58.8% [1][14] - The company expects Q2 2025 revenue to be between $28.4 billion and $29.2 billion, representing a quarter-over-quarter increase of approximately 13%, which is above market expectations [1][14] - The company maintains its full-year revenue guidance for 2025, projecting a year-over-year growth of approximately 25% [2][14] - The company is accelerating its expansion in the U.S., with a total investment of $165 billion, expecting 30% of its 2nm capacity to be located in Arizona [3][14] - AI demand is anticipated to double in 2025, with continued strong demand for 3nm and 5nm technologies [4][33] Summary by Sections Q1 2025 Performance - The company reported a net profit of $11 billion, exceeding Bloomberg consensus by 3% [1] - Revenue breakdown by application: smartphones 28%, HPC 59%, IoT 5%, automotive 5%, and DCE 1% [1][13] - Capital expenditure for Q1 2025 was $10.06 billion [13] Q2 2025 and Full-Year 2025 Outlook - The company expects Q2 2025 revenue to be between $28.4 billion and $29.2 billion, with a gross margin forecast of 57.0%-59.0% [14] - The full-year revenue guidance for 2025 remains unchanged, projecting a 25% year-over-year increase [2][14] U.S. Expansion and Capacity - The company is investing an additional $100 billion in Arizona, with plans for multiple fabs using advanced technologies [3] - After expansion, approximately 30% of the company's 2nm and more advanced capacity will be in Arizona [3] AI Demand and Technology Leadership - The company expects AI-related revenue to double in 2025, with strong demand for its advanced process technologies [4][33] - The N2 process is expected to begin production in the second half of 2025, further solidifying the company's technological leadership [4]